Energy Sector Moves to IT BUY Signal - All Sectors, All on BUYs IT and LT

When I look at the DecisionPoint Sector Scoreboard, it is near impossible to be bearish in the longer term. When we see participation in all of the sectors that results in BUY signals across the board, the market is not generally vulnerable to a correction. Price shocks happen, but typically you will see the BUY signals start to disappear on the Scoreboard before a correction or certainly a bear market. We have not added the new Communications SPDR (XLC) to our signal table yet, but if we had, it would show an IT Trend Model Neutral signal. As I'll show you, it is nearing an IT Trend Model BUY signal as well.

XLE logged its new IT Trend Model BUY signal yesterday when the 20-EMA crossed above the 50-EMA. Volume has been impressive since September 11th where we've seen sustained high volume through a strong rally. This resulted in the OBV breaking out. I note there is a not quite textbook double-bottom in play. "Not quite" because it is a reversal pattern and generally you don't look for these during a sideways move off an uptrend. More important is overhead resistance which price is fighting its way through. The set up is good for a breakout given the positive divergence between the PMO bottoms and the double-bottom in price as well as a PMO BUY signal with a SCTR in the hot zone.

The weekly chart shows a breakout above declining tops, but it also shows the strength of overhead resistance that is arriving. The PMO is curling up to work toward a BUY signal.

Here's the new XLC SPDR chart. We've populated the database historically based on its current members. Note that the 20-EMA hasn't broken above the 50-EMA. I'm expecting to see that BUY signal come in based on the PMO BUY signal that recently triggered. When we add XLC to our signal table, it may or may not have a BUY signal.

About the author:Erin Swenlin is a co-founder of the DecisionPoint.com website along with her father, Carl Swenlin. She launched the DecisionPoint daily blog in 2009 alongside Carl and now serves as a consulting technical analyst and blog contributor at StockCharts.com. Erin is an active Member of the CMT Association. She holds a Master's degree in Information Resource Management from the Air Force Institute of Technology as well as a Bachelor's degree in Mathematics from the University of Southern California.
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